02

Global and
Regional Trends
and Prospects

Chapter 2 Global and Regional Trends and Prospects | 13

Chapter 2

Global and Regional Trends and

Prospects
The next six years is likely to be a period not just of major change and growing
uncertainties, but also of great possibilities. To plan appropriately for the future,
it is important to be familiar with the inter-related trends in various areas such
as economics, politics, demographics, technology, and environment, both at the
international and regional levels.

Economic Trends
Muted Global Economic
Recovery
Since the 2008-2009 global financial
crisis, global economic growth has been
sluggish, without any immediate prospect
of renewed economic vigor.1 From an
average growth of 5.1 percent in 2003-
2007, global output growth slowed to
an average of 3.2 percent in 2008-2015.2
After a weak outturn in 2016 (estimated
at 3.1%), economic activity is expected
to accelerate slowly in the medium term.
Overall though, the global economy is
seen to remain weak, with average growth
rising only slightly to 3.6 percent in 2017-
2021. Moreover, the outlook is clouded
by uncertainty on the policy stance of
the new administration in the United
States of America, which may have global
repercussions3.

Figure 2.1 GDP Growth

Source: International Monetary Fund, World Economic Outlook database, October 2016

1
Hill, Hal. 2016. Setting the Scene: the Global and Regional Context. Unpublished manuscript
2
IMF. October 2016. “Annual growth of world output at purchasing-power-parity weights.” World Economic Outlook
Database.
3
IMF. January 2017. World Economic Outlook Update

Chapter 2 Global and Regional Trends and Prospects | 15

 Economic growth in emerging markets and
developing economies in Asia has likewise
slowed from an average of 9.5 percent in
2003-2007 to 7.5 percent in 2008-2015.
This is largely driven by the slowdown in
China from an average of 11.7 to 8.6 percent
growth during the same periods. Growth
from 2017-2021 is expected to slow down
further to an average of 6.3 percent in
emerging Asia and 6.0 percent in China.
In the ASEAN-5 (Association of Southeast
Asian Nations: Indonesia, Malaysia,
Philippines, Thailand, and Vietnam), the
Figure 2.2 Average Crude Oil Price (in USD/bbl)
Source: Actual Data from World Bank Commodity Price Data – the Pink Sheet (January 2017); Forecasts in
red from World Bank Commodity Markets Outlook (January 2017)
Sluggish International
Trade
Growth in global trade (export volume) also
slowed significantly from an average of 8.3
percent in 2003-2007 to 3.0 percent in 2008-
16 | Philippine Development Plan 2017-2022
slowdown was not as pronounced, with 5.7
percent average growth in 2003-2007 and 5.1
percent in 2008-2015. The region’s economy
is expected to gradually recover with growth
averaging at 5.4 percent in 2017-2022.
Oil prices are also expected to rise gradually
following the agreement among OPEC
members and several other major producers
to limit supply. Nevertheless, oil prices are
not expected to return to pre-2014 levels
given the rise of shale oil, in addition to
increasing the adoption of renewable energy
and conservation measures.
2015. World merchandise trade volume is
expected to have grown by just 2.2 percent
in 2016, the slowest since the global financial
crisis. Export growth is expected to improve
only slightly to an average of 3.9 percent in
2017-2021.
Figure 2.3 Merchandise Exports Volume Growth

Source: International Monetary Fund, World Economic Outlook database, October 2016

In the face of the trend toward inward-
looking policies and protectionism,
concluding preferential or multilateral
trade agreements may become increasingly
difficult. This comes with the risk of
igniting trade wars or ignoring established
international rules in trade and commerce.
Nevertheless, the fundamental trends
driving increased global economic
integration are likely to remain. This
includes the rise of global production
networks (GPNs) and buying chains, much
of them under the auspices of multinational
enterprises. GPNs already account for about
half of intra-East Asian trade and intra-
ASEAN trade, most of them in electronics4.
The sluggish growth in 2012-2014 and
the magnitude of the decline in trade
of goods and services in 2015 suggest a
potential change in the dynamics behind
the international integration process.
The fall in commodity prices and the
appreciation of the US dollar are the factors
that contribute most to the nominal fall in
world trade. Another contributing factor
is the shortening of global value chains.
Some countries, including those in East
Asia, may be re-shoring and consolidating
manufacturing production processes5.
Technological change – which has led to
declining transport costs – and the internet
revolution have made a dramatic effect in
lowering the costs of business within and
across countries, including in the services
sector6. Many business services can now be
provided over the internet at greatly reduced
cost, and this trend is likely to accelerate7.

4
Hill, Hal. 2016. Setting the Scene: the Global and Regional Context.Unpublished manuscript
5
UNCTAD. December 2016. Key Indicators and Trends in International Trade
6
Hill, Hall. 2016. Setting the Scene: the Global and Regional Context”. Unpublished manuscript
7
Goswami et al. 2012. Exporting Services: A Developing Country Perspective. Washington DC: World Bank

Chapter 2 Global and Regional Trends and Prospects | 17

 Surge in Foreign
Investments
Prior to the global financial crisis, global
foreign direct investment (FDI) inflows
averaged USD1.1 trillion from 2003-2007.
This increased to an average USD1.4 trillion
between 2008 and 2015. In 2015, global
flows of FDI rose by about 40 percent, to
USD1.8 trillion, the highest level since the
global economic and financial crisis began
in 2008. However, this growth did not
translate to a proportionate expansion in
productive capacity in all countries.
For developing Asia, however, FDI inflows
increased by 79 percent from USD237
billion in 2003-2007 to USD424 billion in
2008-2015. In 2015, this region remained the
largest recipient of FDI while flows declined
steeply among countries transitioning to a
market economy in Southeast Europe and
the Commonwealth of Independent States8.
An increase of 16 percent in FDI inflows to
USD541 billion for developing Asia in 2015
was primarily driven by increased FDI in
East and South Asian economies. In East
Asia, FDI rose by 25 percent to USD322
billion, reflecting large equity investments
related to a corporate restructuring in Hong
Kong, China, and dynamic FDI flows to the
services sector of China.
ASEAN received only USD52 billion in FDI
on average in 2003-2007, but this increased
by 93 percent, to USD100.2 billion on
average, in 2008-2015. In 2015, FDI in low-
income economies such as Myanmar and
Vietnam soared, but this was offset by the
8
UNCTAD, World Investment Report 2016
9
UNCTAD. October 2016. Global Investment Trend Monitor
18 | Philippine Development Plan 2017-2022
lackluster performance of higher-income
countries, including Indonesia, Malaysia,
and Singapore.
Hindered by the current global and regional
economic slowdown, FDI inflows to
developing Asia are expected to decline in
2016 by about 15 percent, reverting to their
2014 level. Data on cross-border merger
and acquisition sales and announced
greenfield investment projects support the
expected decline. However, flows to Asian
economies such as China, India, Myanmar,
and Vietnam are likely to see a moderate
increase in inflows in 2016.
Over the medium term, global FDI flows are
projected to resume growth in 2017 and to
surpass USD1.8 trillion in 2018, reflecting
an expected increase in global growth.
Despite the decline in outflows from
developing Asia by 17 percent, at USD332
billion, the region’s outward FDI in 2015
remained the third highest ever. Outward
FDI from a number of Asian economies,
including China and Thailand, increased.
With outflows worth USD128 billion,
China was the third largest investing
country worldwide, after the United States
of America and Japan.
There are indications that intraregional
investments are rising, and among the
most important industries driving this
development are infrastructure and
electronics. In 2015, 53 percent of the value
of greenfield projects came from developing
Asia, particularly from China, India, the
Republic of Korea, and Singapore.9
Figure 2.4 FDI Inflows
Source: UNCTAD database
Asynchronous Monetary
Policy in Advanced
Economies
With the improved performance of the US
economy, the Federal Reserve has started
raising its policy rates. Consequently, the
International Monetary Fund expects a
less gradual normalization of monetary
policy and some fiscal stimulus10. The
10
IMF. January 2017. World Economic Outlook Update
fiscal policies considered by the new US
Administration, including reducing taxes
and increasing infrastructure spending, are
likely to raise the budget deficit and lead to
higher interest rates. On the other hand,
monetary authorities in the European Union
(EU) and Japan are likely to maintain their
accommodative stance in order to support
the slow recovery of their economies. These
unaligned policies produce volatilities
in capital flows and in the exchange rate.
Chapter 2 Global and Regional Trends and Prospects | 19
 Political Trends
Populist and Protectionist
Tendencies
World Trade Organization reports
indicate that during the global financial
and economic crises, there was a modest
increase in protectionist pressures. The
number of new measures remains high and
the rollback of existing trade-restrictive
measures continues to be slow. In addition,
the rate of trade facilitating measures
applied each month declined against the
previous period, remaining below the 2009-
2015 trend11.
Trade remedy investigations were the
most popular trade-restrictive measures,
representing 72 percent, which is above
the average share observed since 2009.
The G20 economies initiated much more
trade remedy actions (61) than they
terminated (36) during the latest reporting
Figure 2.5 G20 Trade-restrictive Measures (Average per Month)
Source: World Trade Organization, Report on G20 Trade Measures, November 2016
11
WTO. November 2016. Report on G20 Trade Measures
12
WTO. November 2016. Report on G20 Trade Measures
13
WTO. November 2016. Report on G20 Trade Measures
20 | Philippine Development Plan 2017-2022
period. Metal products (particularly steel),
chemicals, plastics, and rubber account for
most of anti-dumping and countervailing
initiations during the review period.12
As a result, the share of global trade affected
by such restrictions gradually rose. As of the
most recent reporting period, the share of
world imports covered by import-restrictive
measures implemented since October 2008
and still in place is 5 percent and the share
of G20 imports covered is 6.5 percent.
Of the 1,671 trade-restrictive measures
recorded for G20 economies since 2008,
only 408 had been removed by mid-October
2016. The overall stock of measures has
increased by 5.6 percent compared to the
previous report--with the total number of
restrictive measures in effect now at 1,263.
The rollback of trade-restrictive measures
recorded since 2008 remains too slow and
continues to hover just below 25 percent.13
Figure 2.6 Figure Stockpile of Trade-restrictive Measures

Source: WTO, Report on G20 Trade Measures, November 2016

As a consequence of the global financial Upcoming changes in political leadership

crisis, there has been a growing backlash
against the consequences of globalization.
Over the medium term, politicians and
interest groups are expected to capitalize
on the backlash to push for populist and
protectionist agenda. This situation raises
the risk of ushering in or reinforcing
authoritarian governments.
in France, Germany, Netherlands, and Italy
could further fuel this trend, possibly calling
into question the future of the European
project. Political developments in China
and Russia need to be keenly monitored as
well.

This backlash seems to be manifested in

Rise of Fundamentalism
the results of the United Kingdom (UK)
The threat from terrorism has been
referendum on Brexit and the US Presidential
growing, as illustrated by a number of recent
elections. The UK seems headed for a “hard
attacks carried out in Europe, Asia, Africa,
Brexit”, where it would likely leave the EU
among others. While the Islamic State has
Single Market, though possibly in phases.
suffered significant setbacks, it is likely to
While the UK government is keen on
take several more years before the threat,
concluding the process within the two years
including retaliation from the group and
provided under Article 50 of the EU Treaty,
its other sympathizers, is fully neutralized.
negotiations on the terms may take much
Generally, the Middle East will probably
longer, leading to further uncertainties. A
continue to be a region of instability.14
full-blown trade war between the US and
China could plunge the global economy
into a recession.

14
Hill, Hal. 2016. Setting the Scene: the Global and Regional Context. Unpublished manuscript

Chapter 2 Global and Regional Trends and Prospects | 21

 Maritime Disputes
In 2016, the Permanent Court of Arbitration
ruled in favor of the Philippines on the
case of the West Philippine Sea. Despite
this development, conflicting interests and
claims in the West Philippine Sea are likely
to remain unresolved given the challenges
in enforcing the Court’s ruling.

Social and Demographic Trends

Social and demographic factors the populations in Europe and Northern
will increasingly become important America, 20 percent in Oceania, 17 percent
determinants of economic progress in the in Asia and Latin America, and 6 percent in
country and the world. Africa. In fact, the number of older persons
is expected to grow fastest in Latin America
and the Caribbean (71%), followed by
Ageing Populations Asia (66%), Africa (64%), Oceania (47%),
Northern America (41%), and Europe
(23%). By 2050, life expectancy at birth is
Better nutrition, sanitation, healthcare,
projected to surpass 80 years in Europe,
education, and economic well-being have
Latin America and the Caribbean, Northern
led to changes in reproductive and life
America, and Oceania; it will approach
expectancy trends. People are living longer
80 years in Asia and 70 years in Africa16.
and healthier and having fewer children.
The global population will continue to age
China is also ageing quickly. In spite of the
quickly, especially in several major rich
recent relaxation of the one-child policy, the
countries and regions, notably, Japan and
process will accelerate as the second and
most of the EU15.
third-generation effects of the policy are felt17.
Recent reports indicate that even Thailand
Between 2015 and 2030, the number of
and Vietnam are facing the challenge of
senior citizens in the world is projected
population ageing. Thailand’s population
to grow by 56 percent, from 901 million
is predicted to begin declining before
(1:8 people) to more than 1.4 billion (1:6
2020, as its fertility rate has been below
people). The ageing process advanced the
replacement level for 20 years and continues
most in Europe and Northern America,
to fall. Data from Vietnam’s 2009 census
where more than 1:5 people were aged
shows that the number of older persons–
60 or over in 2015. However, ageing is
older women, in particular––has risen
expected to grow quickly in other regions
more rapidly than any other age group18.
as well. By 2030, older persons are expected
to account for more than 25 percent of

15
APEC. 2009. APEC Economic Policy Report
16
United Nations Department of Economic and Social Affairs. World Population Ageing2015
17
Hill, Hal. 2016. Setting the Scene: the Global and Regional Context. Unpublished manuscript
18
UNFPA. http://www.unfpa.org/news/thailand-and-viet-nam-face-new-development-challenge-ageing-populations

22 | Philippine Development Plan 2017-2022

Figure 2.7 Percentage Aged 60 Years or Over by Region, 1980-2050

Source: United Nations Department of Economic and Social Affairs, World Population Ageing 2015.

The ageing workforce in advanced economies by narrowing inter-country differences, as

will continue to support the demand for
migrant workers. In contrast, the workforce
in the Philippines will remain relatively
young for some time. However, the backlash
against globalization is also bringing a rising
sentiment against immigration in some
countries. This could lead to more stringent
migration policies and procedures, as well
as to less hospitable working environments
for migrant workers.
Inequality May Persist in
Some Nations
Related to these demographic trends,
inequality is likely to continue to be a
major global challenge.. It is probable that
the trends of the past decade or more will
continue19. That is, inequality across nations
will likely decline. This is driven mainly
many low- and middle-income economies
grow faster than the rich ones. Much of this
narrowing gap is driven by the dynamic
Asian economies. Trends in inequality
within countries are difficult to forecast, but
high or rising inequality will likely continue
to be a major challenge in most countries20.
Technological Trends21
It is impossible to predict the speed and
direction of future technological change.
Many of tomorrow’s jobs do not yet exist.
Historically, over 95 percent of research
and development, and hence, innovation,
occurred in member nations of the
Organisation for Economic Cooperation
and Development (OECD). However, much
of future innovation will originate in today’s
middle-income economies, especially those
with a strong research and development base
such as China, India, Russia, and Brazil.22

19
Bourguignon, F. 2015. The Globalization of Inequality. New Jersey: Princeton University Press
20
Hill, Hal. 2016. Setting the Scene: the Global and Regional Context. Unpublished manuscript
21
Information in this section is based on OECD Science, Technology and Innovation Outlook 2016
22
Hill, Hall. 2016. Setting the Scene: the Global and Regional Context. Unpublished manuscript

Chapter 2 Global and Regional Trends and Prospects | 23

 Shift Towards Universities
and Private Funding
Most OECD economies continued to Public research in OECD has also been
maintain or increase public spending on shifting toward universities. These
research and development between 2000 universities, in turn, are increasingly relying
and 2015. On average, however, public on private funding, including from charities,
spending on R&D in OECD countries philanthropists, and private foundations.24
declined between 2000 and 2015.23

Figure 2.8 Government Budget Appropriations and Outlays for Research and
Development as a Share of Total Government Expenditures, 2000 and 2015

Source: OECD Science, Technology and Innovation Outlook 2016.

Figure 2.9 Public Research and Figure 2.10 Public Research Funding
Development Expenditure, Total OECD, by Industry, OECD, USD Million
as a Share of GDP, 1981-2014 Purchasing Power Parity at Constant
Prices, 1981-2013

Source: OECD Science, Technology and Innovation Outlook 2016.

23
OECD. Science, Technology and Innovation Outlook 2016
24
OECD. Science, Technology and Innovation Outlook 2016

24 | Philippine Development Plan 2017-2022

Upcoming Disruptive
Technologies
Among the most promising and potentially
disruptive emerging technologies are the
Internet of Things, big data analytics,
artificial intelligence, neurotechnologies,
nano- or microsatellites, nanomaterials,
additive manufacturing, advanced energy
storage technologies, synthetic biology, and
blockchain.
The Internet of Things envisions a
hyper-connected, digitally-responsive
society. The largest impact is expected
in healthcare, manufacturing, network
industries, and local government. While
it has great potential to support human,
societal, and environmental development,
several safeguards need to be put in place
to ensure data protection and security.25
Big data analytics is a set of techniques
and tools used to process and interpret
large volumes of data that are generated
by the increasing digitization of content,
the greater monitoring of human activities,
and the spread of the Internet of Things. It
will play a key role in the innovation and
competitiveness of firms. Its application
to public sector data can improve
government policies and public services.
Monitoring and predictive analytics
can lead to earlier detection of illnesses.
However, it is important to balance the
need for openness with the threats to
privacy, security, equity, and integrity.26
Artificial intelligence is the ability of
machines and systems to acquire and
apply knowledge and carry out intelligent
behavior. This technology makes robots
that can adjust to changing working
25
OECD. Science, Technology and Innovation Outlook 2016
26
OECD. Science, Technology and Innovation Outlook 2016
27
OECD. Science, Technology and Innovation Outlook 2016
28
The Economist. The World in 2017
29
OECD. 2016. Science, Technology and Innovation Outlook 2016
30
OECD. Science, Technology and Innovation Outlook 2016
conditions, reduce work accidents, and
enhance decision-making in hazardous
and dangerous situations, thereby leading
to substantial savings and increased
productivity. Demand for knowledge
workers who are able to develop artificial
intelligence will increase. Creative or
tacit knowledge, which is less codifiable,
and skills requiring social interaction or
physical dexterity, which are less easy to
automate, are likely to remain unaffected.27
Advances in artificial intelligence are
expected to have beneficial impact on
health, environment, and other areas. It
may take some time though before societies
and governments accept this technology
and to put in place the appropriate
regulations for its use, especially in sensitive
areas such as transport and medicine.28
On the other hand, the use of artificial
intelligence in less sensitive areas such as
voice computing may find wider acceptance,
posing a challenge to the call center industry
for instance.
Neurotechnology is an artificial means of
interacting with the brain and nervous
system in order to investigate, access, and
manipulate the structure and function
of neural systems. It can greatly enhance
diagnosis and therapy. However, some
neurotechnologies raise ethical, legal, social,
and cultural questions.29
Nano/microsatellites, which weigh between
1 kilogram (kg) and 50 kg, offer vast
opportunities for making construction
faster and more flexible. They can also be
used in navigation, communications or
remote sensing for civilian and defense
purposes. Increasing use of such satellites
requires the right regulatory framework and
business environments to ensure proper
use.30
Chapter 2 Global and Regional Trends and Prospects | 25
 Nanomaterials are materials whose external
dimension is in the nanoscale (10-9 meter).
They have unique optical, magnetic, and
electrical properties that can be used in
healthcare, energy, and other technologies.
However, technical constraints and
uncertainties over their toxicity to humans
and the environment must be considered.31
Additive manufacturing––also known
as three-dimensional (3D) printing––
encompasses different techniques that build
products by adding materials in layers, often
using computer-aided design software.
3D printing technologies may bring
about new products in health, medicine,
biotechnology, and metal processing
among others. This could lead to changes
in work and production patterns. As 3D
printing becomes more accessible, legal and
regulatory issues regarding data protection,
product liability, and intellectual property
will become increasingly important.32
Energy storage technology is a system that
absorbs energy and stores it for a period of
31
OECD. Science, Technology and Innovation Outlook 2016
32
OECD. Science, Technology and Innovation Outlook 2016
33
OECD. Science, Technology and Innovation Outlook 2016
34
OECD. Science, Technology and Innovation Outlook 2016
35
OECD. Science, Technology and Innovation Outlook 2016
26 | Philippine Development Plan 2017-2022
time before releasing it to supply energy or
power services. Advances in this technology
are important to optimize energy systems
and allow the integration of renewable energy
systems. As the materials, technologies, and
deployment applications for storing energy
are created, ensuring safety and minimizing
the risk of failure and losses become crucial.33
Synthetic biology is a new field of research
in biotechnology that uses engineering
principles to manipulate the genetic make-
up of organisms. It allows new biological
parts to be constructed and natural
biological systems to be re-designed. It is
expected to have a wide range of applications
in health, agriculture, industry, and energy.
It also raises major legal and ethical issues.34
The Blockchain is a database that allows the
transfer of value within computer networks.
It technology is expected to be used in several
markets to ensure trustworthy transactions
without the need for a third party. However,
it is constrained by unresolved technical
issues and risk of abuse for illegal purposes.35
Environmental Trends
Climate Change
The science of climate change may continue
to be controversial and highly uncertain,
though there is now wider consensus among
professionals about the gradually rising
average temperatures and climate volatility.36
The Intergovernmental Panel on Climate
Change (IPCC) says that the average global
temperature increased by 0.85 degree
Celsius (°C) between 1880 and 2012. As a
result, major crops like maize and wheat
have suffered significant yield reductions
at the global level of 40 megatonnes (MT)
per year between 1981 and 2002. Also, the
global average sea level increased by 19
Figure 2.11 Global Average Surface
Temperature Change (Relative to 1986-
2005)
Source: IPCC, 2014: Climate Change 2014 - Synthesis Report.
36
Hill, Hall. 2016. Setting the Scene: the Global and Regional Context. Unpublished manuscript
37
World Meteorological Organization. https://public.wmo.int/en/media/press-release/wmo-confirms-2016-hottest-year-
record-about-11%C2%B0c-above-pre-industrial-era
38
UN. http://www.un.org/sustainabledevelopment/blog/2017/01/climate-change-will-lead-to-annual-coral-bleaching-study-
predicts/
centimeters from 1901 to 2010, as oceans
expanded due to warming and melting of
ice. The Arctic has been losing 1.07 million
square kilometers of ice every decade since
1979. The increase in global temperature
by the end of this century will likely exceed
1.5°C compared to the levels from 1850 to
1900, considering the continuous emissions
of greenhouse gases. In fact, 2016 was
declared the hottest year on record, with
the global average temperature about 1.1°C
higher than the pre-industrial period.37
This condition led to widespread coral
reef bleaching. If current trends continue,
nearly all of the world’s coral reefs will
suffer severe bleaching every year.38
Figure 2.12 Global Mean Sea Level Rise
(Relative to 1986-2005)
Chapter 2 Global and Regional Trends and Prospects | 27
 The world’s oceans will also continue to
warm and the ice melt. Average sea level
rise is predicted at 24-30 cm by 2065 and
40-63 cm by 2100. Most aspects of climate
change will persist for many centuries even
if emissions stop. 39
To address climate change, countries
adopted the Paris Agreement at the
Conference of Parties 21 on December 12,
2015. All signatories agreed to limit global
temperature rise to below 2°C and to strive
for 1.5°C.40 The Paris Agreement represents
an important step in international efforts to
combat climate change. However, potential
changes in the direction of US policy could
undermine the implementation of the
agreement. Nevertheless, where the local
impact of climate change and environmental
degradation has become more evident,
pressure from domestic stakeholders may
encourage their governments to pursue the
path of sustainable development.
The next six years will be filled with great
challenges for policymakers in emerging
economies, such as the Philippines, which
have little control over global and regional
trends. The following chapters illustrate how
the country intends to navigate through
these difficult times.

Figure 2.13 Widespread Impacts Attributed to Climate Change Based on the Available
Scientific Literature Since 4th Assessment Report of the IPCC

Source: IPCC, 2014: Climate Change 2014 - Synthesis Report.

39
UN. http://www.un.org/sustainabledevelopment/climate-change-2/
40
UN. http://www.un.org/sustainabledevelopment/parisagreement22april/

28 | Philippine Development Plan 2017-2022